The importance of gas infrastructure investment

The Australian Competition and Consumer Commission (ACCC) Gas Inquiry 2017-18 Interim Report has been released, highlighting the importance of investment in Australia’s gas infrastructure.

The report notes that despite an environment that includes some conditions that would normally prompt investment, such as high international oil and gas prices, investment is occurring at a slower rate than required to produce an increase in supply that would reduce prices.

APGA Chief Executive Officer, Steve Davies, said, “Energy infrastructure projects like gas transmission pipelines benefit from long-term policy and regulatory certainty as they are long-lived assets that take many years to recover the full investment.”

“That’s an important element that has been missing for quite some time. It is crucial that we do not lose sight of this as we head towards a federal election.

“After all, delays in getting the settings right pose an increasing risk to Australia’s gas-dependent manufacturing sector and we cannot risk losing that.

“The pipeline industry is always keen to invest and projects across the east coast are under active investigation despite the challenging conditions of policy and supply uncertainty.

“Competition to build new projects is fierce, as demonstrated by the number of parties that vied to build the just completed Northern Gas Pipeline.

“Long-term contracts are also key to investment decisions and, as the ACCC notes, they are in scarce supply in the current environment of uncertainty.

“Contrary to the ACCC’s suggestion, the majority of gas transmission pipelines are not fully underwritten by long-term contracts ahead of construction, so these projects have never been risk-free. Investment risk is increased when long-term contracts are harder to find.

“The report shows that contracting activity is healthy, with 103 new and varied contracts being executed between 1 August 2017 and 30 August 2018. While not all variations resulted in new prices, increases in flexibility and improvements to services still deliver increased value to customers and that is a good outcome.

“The report also shows that contract terms are clearly decreasing but prices are staying relatively level. This is significant as long-term contracts usually attract lower tariffs. That contract terms are decreasing without increasing prices is further demonstrating that customers are getting increased value from pipeline operators.

“At the end of the day, pipeline operators and participants in the gas market have aligned interests to ensure affordable, sufficient gas is delivered to allow the east coast gas market to thrive.”

Lauren ‘LJ’ Butler is the Assistant Editor of Utility magazine and has been part of the team at Monkey Media since 2018.

After completing a Bachelor of Media, Communications and Professional Writing at the University of Wollongong in 2014, and prior to writing about the utility sector, LJ worked as a Journalist and Sub Editor across the horticulture, hardware, power equipment, construction and accommodation industries with publishers such as Glenvale Publications, Multimedia Publishing and Bean Media Group.